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Country overview: Pakistan A digital future Copyright © 2016 GSM Association
COUNTRY OVERVIEW: PAKISTAN
GSMA Intelligence
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This report was authored by
Jan Stryjak, Lead Analyst
Henry James, Mobile Ecosystem Specialist
Important notice from Deloitte
The chapters entitled “Supporting mobile’s contribution The scope of Deloitte’s work has been limited by the
to Vision 2025: the role of tax”, “Supporting mobile’s time, information and explanations made available to us.
contribution to Vision 2025: promoting investment, The information contained in Chapters 2 and 3 and the
affordability and economy growth” and “Appendix: Appendix has been obtained from the GSMA and third-
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All copyright and other proprietary rights in Chapters 2 and
solely for the purposes of assessing the economic impacts
3 and the Appendix are the property of GSMA.
of mobile sector taxation in Pakistan by modelling the
potential impacts that could be realised by a change in Any decision to invest, conduct business, enter or exit the
mobile taxation under a set of agreed assumptions and markets considered in Chapters 2 and 3 and the Appendix
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i
COUNTRY OVERVIEW: PAKISTAN
Contents
Executive summary 2
1 Pakistan as a digital society 6
1.1 Pakistan in numbers 7
1.2 Mobile market evolution 10
1.3 Looking to the digital future 19
2 Supporting mobile’s contribution to Vision 2025:
the role of tax 34
2.1 Taxes on mobile consumers 37
2.2 Regulatory fees and taxes on mobile operators 42
2.3 The contribution of the mobile sector 45
2.4 Taxes and fees on the mobile sector in Pakistan
and taxation best practice 48
3 Supporting mobile’s contribution to Vision 2025:
promoting investment, affordability and economic growth 52
3.1 Impact of tax reform on mobile affordability
and investment 54
3.2 The impact of specific tax and fee changes 61
4 An agenda for reform: an enabling environment for
mobile consumers and operators 68
4.1 The current taxation of the mobile sector 69
4.2 Projected benefits of tax reform towards Pakistan’s
Vision 2025 objectives 71
4.3 Options for tax reform 72
4.4 A forward-looking regulatory framework 73
Appendix: methodology 76
Estimation of the economic impact of a tax change 77
Key assumptions 79
Scenario estimations 81
COUNTRY OVERVIEW: PAKISTAN
Executive summary
2
COUNTRY OVERVIEW: PAKISTAN
Pakistan has grown quickly, but the digital divide is still wide
Pakistan has an emerging mobile industry: there Afghanistan. Many citizens either cannot afford or do
are approximately 90 million unique subscribers in not know how to use the devices and services that
the country, accounting for 47% of the population. deliver mobile broadband.
However, the enablers of mobile internet connectivity:
infrastructure, affordability, consumer readiness Over the next three years, mobile subscriber
and content, all rank low in Pakistan relative to its penetration will grow to just over half of the
neighbours. These enablers are critical to creating country’s population – only a small increase from
the right conditions of supply and demand for mobile now. Today’s users will accelerate their transition to
internet connectivity to flourish. Pakistan therefore has mobile broadband from 2G services, with improved
one of the lowest penetration rates in South Asia. network coverage and more affordable smartphones
the key drivers. By 2020, mobile broadband will be
Although mobile broadband (3G and above) coverage accessed by about a third of the population, albeit
has increased rapidly since launch in 2014, reaching predominantly those migrating from 2G. Given the lack
75% of citizens by mid-2016, uptake has remained of fixed line broadband connectivity in Pakistan, the
low: as of June 2016, only around 10% of Pakistanis digital divide – between those that have access to the
subscribed to mobile broadband services. This internet and those that do not – will remain substantial.
is the lowest of any South Asian country except
Mobile is laying the foundations for a digital society
Pakistan is an emerging digital society: digitisation Pakistan’s mobile sector is in a unique position to
is still in its early stages, and is used mainly as a support the country’s digital development for three
tool for accelerating socioeconomic development, key reasons:
particularly in improving digital and financial inclusion.
However, through its Vision 2025 strategy, Pakistan • mobile can connect more people than any other
aims to complete its transition to a knowledge- technology, particularly in underserved rural areas
based economy, creating a globally competitive and
• mobile can provide secure access to a variety of
prosperous country that provides a high quality of life
digital services such as health and education
for all its citizens.
• mobile can provide a platform to provide financial
Vision 2025 aspires to a more advanced digital society: inclusion, engaging many people in the economy
digital development can drive increased engagement for the first time.
between individuals and institutions, provide huge
In parallel, innovative services that run over mobile
growth potential and productivity gains in all
networks can support many of the government’s
sectors, and enable more advanced and innovative
Vision 2025 objectives, such as increasing enrolment in
government services.
education, improving food security and driving private
sector growth.
3
COUNTRY OVERVIEW: PAKISTAN
Accelerating mobile-led growth
Mobile operators in Pakistan are playing their part in innovating to deliver the services that will accelerate
progress towards the goals of Vision 2025 – and in doing so generating growth, jobs and investment in the wider
economy. But they have an opportunity to do more. Today, more than half of Pakistani citizens do not subscribe
to a mobile service, and some (predominantly rural) areas of the country do not have high-quality mobile
broadband coverage at all. There is a clear role for the government in addressing some of the factors that lie at
the heart of this issue, and its agenda must focus on the following areas.
Recognising the impact that mobile-specific taxation has on uptake of mobile services
Mobile consumers and operators in Pakistan are These higher taxes and fees on mobile services may
subject to general taxes, some of which are higher for reduce affordability: for example, for the poorest 20%
mobile services than for other goods and services. of the population, the total cost of mobile ownership
These include sales tax/federal excise duty (FED) and may account for as much as a fifth of average
withholding tax, which together account for more than annual income. Taxes and regulatory fees in Pakistan
two thirds of the tax and regulatory fee payments made represent a large share of final consumer costs
by the sector, and which are higher than those imposed compared to other countries in the region, and could
on other sectors of the economy. Further, taxes and be preventing more widespread uptake of mobile
regulatory fees are applied specifically on the mobile services, including mobile broadband.
sector, including a tax on SIM cards (a relatively rare
form of taxation) and various regulatory, numbering and In addition, the current treatment of the mobile sector
administrative spectrum fees levied on mobile operator may lead to inefficient investment decisions and
revenues. With this different treatment of mobile reduced returns on investment, with potential issues
services compared to other goods and services, the arising from the complexity and frequent changes
mobile sector contributes around 38% of its revenue in of the tax regime, as well as an uncertain business
tax and regulatory fee payments, which is higher than in climate.
most countries for which data is available (2014 data).
Rebalancing sector-specific taxation in line with international best practice
The mobile industry recognises that its fiscal • Removing the SIM card sales tax has the potential
contribution remains critical to financing public to make mobile more accessible. Elimination of
expenditure in Pakistan. However, the current the sales tax could generate almost 1 million new
treatment of the mobile sector may be limiting growth connections over the four-year period to 2021,
in connectivity that could support each of the seven potentially increasing GDP by more than $600
pillars of the Vision 2025 strategy. Reducing taxation million in 2021. Increased activity in the mobile
on mobile services to be more in line with other goods sector may increase employment in the sector
and services, and simplifying the structure of taxes and and the wider economy by more than 2,000
fees, could support economic growth, investment and employees.
fiscal stability. As illustrative examples:
• Reducing regulatory fees has the potential to create
a more favourable environment for investment. For
• Reducing the rate of sales tax/FED on mobile
example, elimination of the annual licence fee could
services has the potential to reduce prices for
generate almost 200,000 new connections over
consumers. A reduction from the current rates
the four-year period to 2021, potentially increasing
of 18.5–19.5% to a uniform 17% could generate an
GDP by $140 million in 2021. Increased investment
additional 1.8 million connections over the four-year
by the mobile sector may lead to 250 new or
period to 2021, potentially increasing GDP by $1.2
upgraded mobile sites by 2021 and 500 new jobs
billion in 2021. Across the wider economy, total
created in the mobile sector alone.
investment could increase by a combined $480
million over the same period.
4
COUNTRY OVERVIEW: PAKISTAN
Given the myriad taxes and fees imposed on the In the medium term, tax and regulatory fee reductions
mobile sector, further reforms may be possible in order on the mobile sector have the potential to increase
to generate similar benefits. For example: wider tax revenue for the government, due to the
benefits from increased mobile usage and growth of
• Mobile operators are not currently considered investment across the economy. In the short term,
industrial undertakings, meaning they face different the government may consider alternative ways to
treatment compared to other sectors in relation cover the tax revenue shortfall from removing sector-
to certain taxes. Addressing this could lead to a specific taxes. As an illustrative example, based on the
simpler and less distortionary tax structure. 2016–17 budget, a modest increase of less than 0.5%
of total general sales tax (GST) may be sufficient to
• Customs duty and sales tax levied on imported
cover revenue shortfalls for each reform scenario. This
handsets are applied using flat rates, which have
estimate is intended to provide perspective on the
a greater impact on the poorest consumers.
scale of tax revenue shortfalls. Aside from changing
Reducing these taxes may lower the costs of
the GST rate, changes to other general taxes, such as
mobile ownership and drive higher penetration.
direct taxes, are alternative options.
Reforming regulation of digital networks and services
Regulation needs to acknowledge the fact that the • clear and simplified licensing practices based on
sector has evolved. The boundaries between the function rather than technology or legacy industry
once-distinct sectors of telecoms and internet services structures, which can accommodate the rapidly
are blurring, and the current regulatory framework changing market and encourage investment and
does not reflect today’s dynamic digital marketplace. innovation
This in turn is causing market distortions that threaten
• a new framework for physical network cooperation
to delay coverage expansion and the emergence of
(including network and spectrum sharing) that is
innovative new services and technologies.
light-touch and focuses on general competition
principles and transparency.
Thankfully, the newly published National Telecoms
Policy includes provisions, which if enacted in a timely Without policy reforms that reflect this changed digital
way, would help to mitigate these problems. Three key landscape, markets will become further distorted, and
areas require immediate attention: investment and innovation will be put at significant
risk. There is a real opportunity for the government,
• a competition policy that considers all market institutions, mobile operators and the wider mobile
players, not just telecoms service providers, industry to work together to make these regulations a
in a technology-neutral environment aimed at better fit for the modern digital ecosystem.
preventing bottlenecks and exclusionary conduct
5
COUNTRY OVERVIEW: PAKISTAN
1
Pakistan as a
digital society
Pakistan as a digital society 6COUNTRY OVERVIEW: PAKISTAN
1.1 Pakistan in numbers
Source: World Bank, UN, PBS, GSMA Intelligence
1 Pakistan key facts
Total population
193 million
Capital city
Islamabad
Official language
English, Urdu
Land area
770,880 square km
��� �� ��� Rural 61%
Urban 39%
MOSTLY
RURAL
Male 51%
Female 49%
EVEN
GENDER SPLIT
GDP GROWTH
0–14 year-olds 35%
15–24 year-olds 20%
25–64 year-olds 41%
65+ year-olds 4%
YOUTHFUL
POPULATION
Female
Male
83%
5.5%
70%
Male
57%
Male
55% 4.7%
43%
Total
4.4%
Total
Female
2013 2014 2015
25%
Female
4% 9% 5% GDP PER CAPITA
Labour force Literacy rates Unemployment
♂$1,429
Lower middle income
participation rate
Pakistan as a digital society 7COUNTRY OVERVIEW: PAKISTAN
Source: GSMA Intelligencet
2 Pakistan mobile market evolution (percentage of population)
100%
80%
54% 48%
63%
60%
88%
100%
40% 8% 28%
12% 19%
20%
24% 15%
12% 18%
0%
9%
2000 2005 2010 2015 2020
Voice only Mobile internet Mobile broadband Not Smartphone adoption
subscribers 2G subscribers subscribers subscribed (% of connections)
Source: GSMA Intelligence
3 Pakistan mobile operator share of connections, Q3 2016
1%
15%
37%
19%
28%
Mobilink/Warid Telenor Zong Ufone Others
Pakistan as a digital society 8COUNTRY OVERVIEW: PAKISTAN
Source: Operator websites, news reports, GSMA Intelligence
4 Major milestones of the Pakistani mobile market
1990 1992 2000
• Mobile services launched • First GSM network • Millicom acquires Paktel
in Pakistan from Cable & Wireless
2005 2004 2003
• 10 million connections. • Cellular Mobile Policy • Telecom Deregulation
Telenor Pakistan and issued. Nationwide GSM Policy issued
Warid launch services licences auctioned
2006 2007 2008
• 25% market penetration • 50 million connections. • 50% market penetration
(connections) China Mobile acquires (connections). Paktel rebranded
Paktel from Millicom as Zong
2014 2010
• 3G/4G auction held after a four-year • 100 million connections
delay. Ufone, Telenor and Mobilink
launch 3G networks, Zong launches
3G and 4G services
2015 2016
• 10 million 3G connections, 1 million • Telenor launches 4G services and
4G connections. Telecom Policy 2015 enters sole bid for 850 MHz band.
published, Warid launches 4G services Mobilink acquires Warid from
Abu Dhabi Group
Pakistan as a digital society 9COUNTRY OVERVIEW: PAKISTAN
1.2 Mobile market evolution
1.2.1 Pakistan’s position in a digital world
Digital technology is evolving rapidly, leading to the emergence
of new services and applications that are transforming the way
people live, work, play and communicate. The large-scale societal
adoption and use of digital technologies is a key driver of measurable
economic, social and cultural value, including increased productivity,
a rise in employment rates, improved security and greater capacity to
tackle social and environmental issues.
In this report, we discuss Pakistan’s vision to create a The GSMA Mobile Connectivity Index measures how
globally competitive and prosperous country providing the key enabling factors for mobile connectivity differ
a high quality of life for all its citizens. However, in order across markets, helping focus the efforts and resources
to better understand the context of this development of the mobile industry and wider international
blueprint that aspires to transform Pakistan into a community on the right projects in the right markets
connected, industrialised and knowledge-based, at the right time, so progress towards universal access
middle-income country by 2025, it is important to first can be as swift and economically sustainable as
assess Pakistan’s position in a digital world today. possible.
The index is built around four key enablers of mobile internet connectivity,
which are critical to creating the right conditions of supply and demand for
mobile internet connectivity to flourish:
Infrastructure – the availability of Consumer readiness – citizens with the
high-performance mobile internet awareness and skills needed to value and use
network coverage the internet, and a cultural environment that
promotes gender equality
Affordability – the availability of mobile
services and devices at price points that Content – the availability of online content and
reflect the level of income across a national services that are accessible and relevant to the
population local population.
Pakistan as a digital society 10COUNTRY OVERVIEW: PAKISTAN
Source: GSMA Intelligence
5 The Mobile Connectivity Index in Europe, Africa and Asia
Leaders
Fast transitioners
Transitioners
Emerging
Discoverers
Pakistan as a digital society 11COUNTRY OVERVIEW: PAKISTAN
Pakistan has an index score of 33.8, positioning it in penetration is 29% versus a regional average of 32%. In
the bottom 25 countries globally, and is classified comparison to other Discoverer countries worldwide,
as a Discoverer country, meaning there is room for Pakistan scores fairly well in terms of infrastructure,
improvement across all four enablers. affordability and content, hence a slightly higher
overall index score and mobile internet penetration
Compared to the rest of South Asia, Pakistan scores rate. However, one particular area of concern is
particularly poorly on infrastructure and consumer consumer readiness.
readiness, and concurrently, mobile internet
Source: GSMA Intelligence
6 Pakistan in relation to South Asia peers and cluster average
Mobile
Consumer Mobile internet
Connectivity Infrastructure Affordability Content
readiness penetration
Index
Pakistan 34 23 55 25 41 29+71 29%
South Asia 38 30 55 45 31 32+68 32%
Afghanistan 22 27 41 11 21 18+82 18%
Bangladesh 41 33 56 52 30 30+70 30%
Bhutan 37 33 62 43 22 37+63 37%
India 38 25 58 43 33 32+68 32%
Iran 44 23 67 69 38 33+67 29%
Nepal 40 32 45 46 39 32+68 32%
Sri Lanka 49 45 62 73 27 39+61 39%
Discoverers 27 21 39 39 19 22+78 22%
Without the necessary skills and supporting cultural go on to secondary education.1 As for digital literacy,
environment, individuals will not understand how around 40% of mobile phone owners who do not
to use the mobile internet or appreciate how it can use the mobile internet state that they have difficulty
benefit them. Individuals, especially women, might also understanding how to use their mobile handset. 2
find themselves prevented from accessing the mobile
internet. It is therefore important to consider the skills Affordability scores fairly well in the index compared
and education levels of a country, as well as the degree to other Discoverer countries, given that the country
of gender equality in education, finance and in the has among the lowest ARPU in the world, and
labour market. smartphones are available for less than $50. However,
due to the wide income distribution and high poverty
In Pakistan, less than 60% of the population are rate in the country, affordability is a critical issue for
literate or participate in the labour market, and this is those at the bottom of the pyramid, for whom mobile
even lower for females – 43% and 25% respectively. ownership can account for as much as a fifth of their
In terms of education, less than three quarters of average income. This is discussed further in Sections
children are enrolled in primary school, and only 40% 1.2.2 and 3.1.1.
1 World Bank
2 GSMA Intelligence Consumer Survey 2016, a face-to-face survey of a sample of 1,000 respondents in Pakistan across a representative mix of age, gender,
location and social class
Pakistan as a digital society 12COUNTRY OVERVIEW: PAKISTAN
1.2.2 The mobile story to date
Low penetration, but mobile broadband is growing
Pakistan has an emerging digital industry, with mobile penetration and internet usage lower than many of its
regional and economic peers. By mid-2016, there were 90 million unique subscribers3 in Pakistan accounting
for 47% of the population. This is among the lowest penetration levels in South Asia, ahead of only India and
Afghanistan. Further, less than 30% are users of the mobile internet, ahead of only Afghanistan.
With an average subscriber owning 1.5 SIM cards, there were
a total of 135 million connections4 in Pakistan as of Q2 2016,
equating to a connections penetration of 70%.
4
Source: GSMA Intelligence
7 Mobile in South Asia, Q2 2016 (percentage of population)
Maldives 46% 40% 14%
Iran 33% 44% 23%
Sri Lanka 39% 32% 29%
Nepal 32% 23% 45%
Bangladesh 30% 23% 46%
Bhutan 37% 13% 50%
Pakistan 29% 17% 53%
India 32% 14% 54%
Afghanistan 18% 27% 55%
Rest of Asia 57% 15% 28%
0% 20% 40% 60% 80% 100%
Mobile internet Voice only Not
subscribers subscribers subscribed
Pakistan’s first spectrum auction was held in April Over the last few years, mobile operators have
2014, with 3G and 4G spectrum auctioned by the invested heavily in their networks, with total capex
Pakistan Telecommunication Authority (PTA). Mobilink, in Pakistan surpassing $3.3 billion between 2014 and
Telenor, Ufone and Zong all won 3G licences and 2016. This includes the total investment of $1.1 billion
subsequently launched 3G services, while Zong also for 3G and 4G licences as part of the auction in April
won Pakistan’s first 4G licence. Warid Pakistan did 2014, as well as the investment of $395 million by
not participate in the auction, but launched 4G LTE Telenor for 850 MHz spectrum in June 2016. These
services in December 2014 on its existing 2G 1800 MHz licencing costs account for a significant proportion of
spectrum, leaping directly from 2G to 4G. mobile operator revenues, reaching as high as 60% in
2014, highlighting the scale of the investments needed
in delivering mobile broadband across Pakistan.
3 U nique users who have subscribed to mobile services at the end of the period, excluding M2M. Subscribers differ from connections such that a unique user can have
multiple connections.
4 U nique SIM cards (or phone numbers, where SIM cards are not used) that have been registered on the mobile network at the end of the period. Connections differ from
subscribers such that a unique subscriber can have multiple connections.
Pakistan as a digital society 13COUNTRY OVERVIEW: PAKISTAN
Source: GSMA Intelligence
8 Capex trends in Pakistan
2.0
60 59%
1.8
50
1.5
40
1.0 0.9
30 0.7 0.7 0.7 0.7
0.6 27%
0.5 0.5 0.5
0.5 21% 0.4
20 18% 19%
17% 15% 17% 17% 17% 16%
0.0
10 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Capex % of total
$ billion revenue
Following this heavy investment, 3G coverage reached With only two operators, 4G rollout has proceeded
65% by the end of 2015, and by mid-2016, just under more slowly, reaching 18% of the population by
three quarters of the Pakistani population had access mid-2016. However, with Mobilink acquiring Warid
to 3G services. With continued investment – forecast and Telenor beginning 4G rollout in August 2016, 4G
to reach $2.8 billion over the next four years (not coverage will rapidly increase to 80% of the population
including any additional spectrum costs) – 90% of the by 2020.
population will be covered by the end of the decade.
Source: GSMA Intelligence
9 Mobile coverage expansion (percentage of population)
90%
80%
65%
13% 12%
2010 2015 2020
3G coverage 4G coverage
Pakistan as a digital society 14COUNTRY OVERVIEW: PAKISTAN
Despite the rapid spread of mobile broadband nearly a third of the Pakistani population live below
coverage, uptake has remained low: by Q2 2016, the national poverty line, earning less than PKR3,030
only around one in 10 of the population subscribed ($29) per month. For these people, even the cheapest
to mobile broadband services. The primary issues smartphone costs as much as one month’s wages.
explaining this low uptake are affordability, literacy In addition, despite the very low ARPU levels, costs
and security. of mobile ownership and usage can account for 10%
of average income in Pakistan, increasing to over a
Affordability is the biggest barrier in Pakistan: 57% of fifth for the poorest 20% of the population. This is
phone owners who do not use the mobile internet state discussed further in Section 3.1.
handset costs as a key reason. Additionally, 42% of non-
users said that costs of mobile services are too high.5 Other barriers to mobile internet usage include literacy
issues – both in the traditional sense (reading and
The average selling price (ASP) for smartphones in writing) and in terms of digital knowledge; concerns
Pakistan in 2015 was $135.6 While this is one of the over security and privacy; and the lack of availability of
lowest ASPs in the world, it is still more than the content that is relevant or in the local language.
average monthly income of around $120. Further,
Source: GSMA Intelligence Consumer Survey 2016
10 Barriers to mobile internet usage
(percentage of phone owners who don't use the mobile internet)
The cost of mobile internet enabled handsets
is too high 57%
Cost The cost of the service is too high 42%
I have trouble reading 43%
Literacy
I have trouble understanding
(traditional and/or digital)
how to use a mobile handset 37%
I am worried I would be contacted by strangers 31%
Security/privacy
I am concerned that using mobile internet
might expose me to harmful content 27%
I would not be able to access enough content
Lack of content/ and information written in my own language 26%
relevance I would not be able to access enough content and
information about my local area and/or country 21%
There is no internet service coverage
or poor coverage in my area 24%
Other
I do not have the right registration/ID documents 16%
Given these barriers, subscriber growth will be relatively slow in Pakistan for the next few years, reaching only
52% of the population by 2020. This is below much of the rest of the region, ahead of only Afghanistan. Within
the subscriber base however, mobile broadband will grow rapidly due to the continued rollout of networks and
increasing affordability of smartphones: by 2020, mobile broadband will account for more than 50% of total
subscribers (up from a quarter in Q2 2016) and just under 30% of the population (up from just over 10% now).
5 GSMA Intelligence Consumer Survey 2016
6 Strategy Analytics
Pakistan as a digital society 15COUNTRY OVERVIEW: PAKISTAN
Source: GSMA Intelligence
11 Growth of mobile in South Asia (percentage of population)
0.8 64% 38%
35%
66% 57%
49% 43% 32% 24%
0.6 23%
43% 29% 45% 24% 19%
48%
0.4 45% 40% 43% 39%
38% 38%
36%
28% 31%
0.2 22% 21% 22% 25%
20%
10% 7% 10% 8% 8% 6%
0.0 2015 2020 2015 2020 2015 2020 2015 2020 2015 2020 2015 2020 2015 2020 2015 2020 2015 2020
Maldives Sri Lanka Iran India Nepal Bhutan Bangladesh Pakistan Afghanistan
Mobile broadband
2G subscribers subscribers
Smartphone ownership and digital engagement low, but ready to grow rapidly
The affordability barrier, as well as the relatively affordable. The average price of a smartphone in
late rollout of mobile broadband networks, is a key Pakistan dropped to $135 in 2015, the second lowest in
reason why smartphone adoption has remained low the world behind India ($131). Much of this is due to local
in Pakistan – by mid-2016, smartphones accounted smartphone brand QMobile, which offers a large range
for only 17% of total connections. However, following of affordable smartphones: 19 QMobile smartphones
the rapid rollout of 3G and 4G networks since the retail at PKR5,300 ($50) or less, and three – the Bolt T2,
spectrum auction in 2014, mobile broadband services X2 Music and X2i – cost less than PKR3,100 ($30). These
are becoming more widely available and, in parallel, low-end smartphones are proving extremely popular in
smartphones are becoming increasingly affordable. Pakistan given the low purchasing power of the average
individual, and have resulted in QMobile becoming one
Both mobile operators and players in the broader of the country’s leading smartphone vendors with over
mobile ecosystem (such as handset manufacturers) 20% market share.7
are contributing to making mobile services more
Smartphone ASPs are expected to continue to decline in
Pakistan, approaching $100 by 2020. While they will still account
for a large proportion of an average consumer’s income, the
increased affordability will help drive smartphone adoption.
Thus, smartphone connections will overtake feature and basic
phone connections in Pakistan by the end of the decade.
7 Strategy Analytics
Pakistan as a digital society 16COUNTRY OVERVIEW: PAKISTAN
Source: Strategy Analytics, GSMA Intelligence
12 Declining prices helping drive smartphone adoption in Pakistan
$152
$135
$121
$113 $109 $108 $105
51%
43%
34%
26%
19%
14%
10%
0 2014 2015 2016 2017 2018 2019 2020
Smartphone Adoption
ASP (percentage of connections)
The use of social media, whether for communication, In Pakistan, use of social media platforms and IP
business or entertainment, is a basic indicator of the messaging apps is increasing. Facebook is by far the
advancement of a digital lifestyle. Social media is not most popular social media platform in Pakistan with 27
just a platform for individuals; it is a symbol of online million users and 3 billion connections per day (largely
presence for companies and even governments. driven by the popularity of Facebook Messenger).
Examples include the official Twitter updates of Inter- Twitter and Instagram are also popular, with 280 and
Services Public Relations (ISPR – the administrative 250 million connections per day respectively.8
military media brand of the Pakistani Army), political IP messaging is also gaining traction as an alternative
party campaigns, Punjab Food Authority (PFA) posts to traditional voice and text, with almost a quarter
about inspections at various food outlets, and regular of mobile phone owners using such services, most
updates from Rawalpindi DCO (District Coordination notably WhatsApp.910
Officer) on city governance matters.
Mobile is the primary channel for social media – in September
2016, there were 22 million active mobile users of social media
in Pakistan, accounting for over 80% of total social media users,
and a 36% increase on March 2015.10
8 PTA
9 GSMA Intelligence Consumer Survey 2016
10 We Are Social
Pakistan as a digital society 17COUNTRY OVERVIEW: PAKISTAN
Contribution to the wider economy
The telecoms sector makes an important and steadily increasing contribution to the revenues of the Pakistani
government, with PKR126 billion ($1.1 billion) generated in FY 2014–15, approximately a third of sector revenue.
The sector contributes more than 3% of total government tax revenue, despite only accounting for around 1%
of Pakistan’s GDP11. Mobile also supports wider growth. For example, in low to middle-income countries such as
Pakistan, every 10% increase in broadband subscriber penetration accelerates economic growth by 1.38%.
Source: Central Board of Revenue, PTA
13 Telecoms sector contribution to government revenues (PKR billion)
250 243
200
150 133 125 126
112 112 109 117
101
100 77
67
50 38
0
FY FY FY FY FY FY FY FY FY FY FY FY
03–04 04–05 05–06 06–07 07–08 08–09 09–10 10–11 11–12 12–13 13–14 14–15
Note: FY 2013–14 includes revenue from NGMS spectrum auction
The digital sector is key in attracting investment to Further, risk capital has been flooding into Pakistan,
Pakistan. The country has faced low levels of foreign with venture-capital (VC) funding reaching $100
investment in recent years, with many countries million since the start of 2015. Over three quarters of
reducing their investment levels (such as the US, this was in the internet and mobile sector. Examples
Saudi Arabia, Egypt and Germany). However, thanks include the following:
to investments of almost $600 million from China,
Pakistan received just under $1.3 billion in foreign • Daraz – one of Asia’s leading online shops for shoes
direct investment (FDI) in FY 2015–16, a 40% increase and fashion, active in Bangladesh, Myanmar and
on the previous year.12 Around 16% of this was invested Pakistan. It raised $55 million in September 2015.
in the telecoms sector. This is discussed further in
• Zameen – an online real-estate portal connecting
Section 3.1.2.
dealers, developers and estate agencies with
general buyers, sellers and renters across Pakistan.
It has raised just under $30 million in the last year.
• Inov8 – Pakistan’s fastest growing mobile payments
company, enabling access to mobile financial services
for the unbanked and making mobile payments more
convenient for the banked. It attracted an investment
of $5.4 million in October 2015.
11 Deloitte analysis based on operator data, World Bank data and GSMA Intelligence
12 Pakistan Board of Investment
Pakistan as a digital society 18COUNTRY OVERVIEW: PAKISTAN
1.3 Looking to the digital future
1.3.1 Pakistan’s emerging digital society
The term ‘digital society’ refers to a modern society where citizens
seamlessly interact with different aspects of life, including work,
play and communication, over digital channels through a network of
intelligently connected devices and interoperable services. In practice,
people in a digital society can access and interact with a host of
public and private services, including financial services, utilities,
education, health and transportation, anytime and anywhere using
digital technologies.
Internet connectivity is a key foundational element for a digital society – it is the primary requirement for creating,
distributing and consuming digital applications and services. Beyond connectivity however, there are three
broad and interrelated components required for a digital society to function effectively and deliver benefits to all
sectors of society: digital citizenship, digital lifestyle and digital commerce.
Source: GSMA Intelligence
14 Key components of a digital society
DIGITAL DIGITAL DIGITAL
CITIZENSHIP LIFESTYLE COMMERCE
Interaction between Use of smart devices to access Simplifies a commerce
government, businesses and locally relevant content and activity by expanding access
citizens specifically in the non-core communication to marketplaces, replacing
provision and use of public solutions that offer a more physical cash, and facilitating
services over digital channels convenient experience the processing and delivery of
orders over digital channels
CONNECTIVITY
Fast, reliable and continuous individual access to the internet is the
foundation for the creation, distribution and consumption of digital
applications and services
Pakistan as a digital society 19COUNTRY OVERVIEW: PAKISTAN
The level of digitisation in a society depends on the connectivity of its citizens as well as the advancement of
these four components of a digital society. In order to quantify and compare current levels of digitisation, the
GSMA created the Digital Development Index as part of the Digital Societies report series,13 highlighting seven
focus countries across Asia.
Source: GSMA Intelligence
15 Digital Development Index in Asia (selected countries)
73 70 68
41
35 33
27
Australia Japan Singapore Thailand Indonesia Bangladesh Pakistan
A DVA N C ED TR A N S I TI O N EMERGING
According to the Digital Development Index, Pakistan arise with rapid urbanisation. These ‘transition’ digital
is an ‘emerging’ digital society, still in the early stages societies need to progress from connectivity to ‘hyper-
of digitisation. Countries in this category (which also connectivity’, epitomised by interoperability across
includes Bangladesh) largely see digitisation as a tool for networks (regardless of sector) and the implementation
accelerating socioeconomic development, particularly of a forward-looking agenda focused on using those
in relation to improving social inclusion. Most services networks for all manner of services.
centre on digital citizenship and digital commerce, with
the primary goal of increasing citizens’ engagement Finally, the most advanced digital societies, such as
with government and driving digital and financial Australia, Japan and Singapore, are far more focused
inclusion. For these countries, the provision of essential on developing interconnected and interoperable
services, such as healthcare, education and financial digital technologies between sectors, having achieved
services, which are otherwise not easily accessible due comparatively ubiquitous levels of infrastructure access
to a lack of infrastructure, poor logistics and lack of and capacity. Here, the emphasis is on improving
affordability, is a priority. In order to move up the digital efficiency in the utilisation of scarce resources using
value chain, emerging digital societies need to adopt smart technologies such as IoT. This often manifests
holistic planning mechanisms to build the foundational itself in a broader and coordinated strategic approach
elements of more advanced digitally enabled activities to building a digitally enabled society, compared to the
and transactions, and must establish the enabling largely fragmented approach to digitisation in many
regulatory environment for creative disruption to occur. emerging and transition digital societies. To maintain
their competitive edge, ‘advanced’ digital societies
As digital societies become more advanced (for should focus on improving citizen experience when
example, Thailand and Indonesia), personalised services accessing public services and, crucially, assuming a
lead to higher levels of engagement between individuals regional leadership role in standards setting and the
and institutions, and there is an increasing focus on sharing of best practices with other nations (especially
more advanced lifestyle services (e-commerce, for in key areas such as the Internet of Things – IoT) to
example), partly driven by the need to effectively tackle create a truly ‘Digital Asia’.
the social, infrastructural and environmental issues that
13 Building Digital Societies in Asia, GSMA, June 2015 and Advancing Digital Societies in Asia, GSMA, April 2016
Pakistan as a digital society 20COUNTRY OVERVIEW: PAKISTAN
1.3.2 The role of mobile in delivering a digital society
Mobile is well-suited to be the technology of choice Further, mobile broadband brings significant benefits
for a digital society, not only by providing the required to consumers and the Pakistan economy, providing
connectivity foundations, but also in delivering the huge growth potential and productivity gains in all
content necessary for the other components of sectors including education, employment, banking,
digitisation. This is based on the capability of wireless media, health and commerce. It is also a key enabler
networks to cover a wide area with greater efficiency for innovative government services, particularly in rural
than many other technologies, and the increasing and remote areas of the country.
availability and affordability of high-specification
devices capable of supporting a variety of feature-rich Three key elements of a digital society – connectivity,
content and value-added services. identity and financial access – are enabled by mobile
technology.
Connectivity: mobile connects more people than any other technology
Source: ITU (2015), GSMA Intelligence (Q2 2016)
Globally, more than 3.4 billion people are accessing the
internet via mobile and directly benefiting from and
contributing to the digital economy. However, around 16 obile versus fixed
M
4 billion people remain offline, unable to participate
in digital services. The unconnected population is
penetration in Pakistan
(percentage of population)
predominantly located in developing markets, typically
on low incomes.
47%
Mobile represents the best opportunity to bring these
people online, particularly those living in rural areas
and difficult terrains where the cost of deploying other
technologies, such as fixed broadband and Wi-Fi, is
prohibitive.
Mobile networks are increasingly ubiquitous in
Pakistan, covering over 85% of the population. Since
2014, when 3G and 4G licences were allocated,
mobile operators have invested heavily in their
networks ($4.7 billion in capex between Q2 2014 and
Q2 2016), pushing 3G coverage to three quarters
of the population. By 2019, 90% of the population
are expected to be covered by a mobile broadband
network.
In parallel, fixed penetration in Pakistan is very low
due to the limited reach of fixed infrastructure – less
than 2% of the population have a fixed connection,
compared to 47% that subscribe to a mobile service.
This means that mobile technology is well-suited to
extend connectivity and improve service delivery to
rural areas, reducing the digital divide, and can act 1.6%
as the enabler for innovative services where other
technologies and delivery modes fall short. Fixed subscribers Mobile subscribers
Pakistan as a digital society 21COUNTRY OVERVIEW: PAKISTAN
Identity: mobile provides secure access to digital services
Although connectivity is key to the success of digital As the government develops its electronic
services, security is also an important consideration. identification frameworks further and creates online
As the number of digital services has grown and the environments where individuals and organisations
level of risk to which individuals are exposed has can trust each other, cooperation between mobile
increased, governments and businesses recognise the operators and policymakers is required. The GSMA
need for more sophisticated, secure and convenient Mobile Connect service – a mobile operator facilitated
ways of creating, managing and applying digital authentication solution that provides simple, secure
identities. and convenient access to online services – provides
a potential solution. It works by combining the
Mobile identity represents a valuable platform user’s unique mobile number and PIN to verify and
through which to achieve these aims. Mobile offers authenticate them online, offering a single, trusted,
a compelling proposition for governments and mobile phone based authentication solution that
businesses seeking to provide secure access to digital respects their online privacy.
services; the value of mobile identity for businesses
and public administrations lies in its ability to provide Mobile Connect has been launched by nearly 40
increased convenience and accessibility, strong mobile operators in around 30 countries, with potential
security and enhanced privacy for people, as well as to reach more than 2 billion users. In December
lower implementation costs and greater uptake of 2015, Telenor Pakistan introduced Mobile Connect in
digital services. collaboration with Telenor Digital and Homeshopping.
pk, an online retailer. Using the mobile site, simply
Mobile-based identity solutions are already meeting pressing the Mobile Connect button will log the user in
these expectations in Pakistan, spurred on by the to the site, while from a computer users go through a
government’s Biometric Verification System (BVS) simple mobile number verification before they can log
project implemented in January 2015 to register the in to the site.
biometric data of all mobile users in the country as a
security precaution.
Financial access: mobile provides banking for the unbanked
Digital commerce has grown significantly in recent In Pakistan, half of the adult population (approximately
years. A lot of that growth is driven by mobile 60 million people) have access to a mobile phone but
commerce – electronic transactions performed on do not have a bank account. As a result, mobile money
mobile phones. Consumers are increasingly using providers (or ‘branchless banking’ service providers)
contactless payment technologies, such as near field have heavily invested in the opportunity to extend the
communication (NFC), while businesses in various reach of mobile financial services to people outside
industry verticals, including financial services, retail the traditional banking system. Pakistan’s branchless
and transportation, are enhancing the user experience banking industry has flourished since the Branchless
of their digital services on mobile platforms. Banking Regulations and first licences were issued in
2008, and has shown in such a short time that it can
But mobile is not just an alternative channel for serve the needs of the poor and unbanked population,
existing digital commerce platforms. Crucially, it who primarily perform low-value transactions. The
is changing the landscape of financial inclusion in first of such services, Easypaisa, was launched in
developing countries where the majority of people 2009 by Tameer Microfinance Bank and Telenor
without access to formal financial services live. People Pakistan. Since then, six other branchless banking
living in remote rural communities that are culturally operations have launched: two bank-only and four
and socially distinct from cities are able to use mobile partnerships between a bank and mobile operator. All
money to purchase goods and services that would of Pakistan’s mobile operators have launched services
have previously been unobtainable. in partnerships with banks.
Pakistan as a digital society 22COUNTRY OVERVIEW: PAKISTAN
By the end of 2015, 9% of the adult population in With the opportunity to manage their money more
Pakistan (just over 11 million people) had used P2P effectively and generally improve their financial health,
transfer or bill payment services offered by the people have greater access to health and education
branchless banking operators at least once.14 At this and can create micro economies. This results in
point, there were just over 6 million active branchless healthier, more educated people with greater potential
banking accounts, which had generated transactions to drive economic growth.
of just under PKR1.9 trillion ($18 billion) over the
course of 2015, equivalent to approximately 7% of the
country’s GDP.15
Source: SBP
17 Branchless banking in Pakistan
6.3
526
506 5.1
486
3.7
2.3
372 1.5
354
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
Active accounts Transaction value
(million) (PKR billion)
Note: Q1 2015 active accounts declined due to the BVS project
14 Financial Inclusion Insights, InterMedia
15 SBP
Pakistan as a digital society 23COUNTRY OVERVIEW: PAKISTAN
1.3.3 Pakistan Vision 2025
Digitisation can unlock huge social and economic benefits for Asian countries and help governments in the region
tackle some of the challenges they face. Some governments have articulated national aspirational plans around
economic growth and development, job and wealth creation, and citizens’ wellbeing, all of which could benefit from
the digitisation of services and increased connectivity of citizens. For Pakistan, this takes the form of Vision 2025.
Pakistan’s Vision 2025 aims to create a globally The government of Pakistan recognises that ICT is a
competitive and prosperous country providing a high key driver of innovation, economic competitiveness and
quality of life for all its citizens. The mobile industry greater social inclusion: through advances in ICT and by
can support many of the government’s objectives extending access to mobile services, Pakistan has the
outlined in the Vision: both those that are specifically potential to achieve wider social and economic goals.
focused on ICT policy and those related to wider
economic and social developments. In Vision 2025, Launched in August 2014, the Pakistan Vision 2025
the Pakistani government has demonstrated its strategy sets out a range of challenging aspirations
commitment to revolutionising ICT usage across the for the country’s future development. The Vision
country. In particular, it aims to complete Pakistan’s encompasses seven key pillars, which are aligned
transition to a knowledge-based economy through with the United Nations’ Millennium Development and
innovation, education and value addition, while Sustainable Development Goals. The following pages
promoting efficient, sustainable and effective ICT outline how mobile-enabled services can play a key role
initiatives through the development of both industrial in helping achieve the objectives of these seven pillars.
and academic resources. The government has also
recognised the importance of young people in
facilitating further uptake of ICT and in fostering
innovation and entrepreneurship within the sector,
and has outlined several specific aims to promote the
adoption of these technologies:
• Increase the flow of knowledge and ideas through
wider broadband internet access, particularly
through 3G and 4G/LTE networks, which offer
significant increases in bandwidth and internet
speed.
• Introduce m-education, m-commerce, m-health
and m-government, aimed at increasing the
adoption and promotion of technology in the public
sector.
• Reduce tariffs and taxes on R&D equipment,
fostering innovation in new technologies.
• Improve the flow of knowledge across sectors,
with a particular aim of improving agricultural
productivity.
Pakistan as a digital society 24COUNTRY OVERVIEW: PAKISTAN
Pillar Key objectives
1
• Increase primary education enrolment and
completion to 100% (from 73% and 74%
respectively) and literacy to 90% (from 57%)
Putting people
first: developing • Reduce infant mortality rate from 74 to less
human and social than 40 (per 1,000 births) and reduce maternal
mortality rate from 276 to less than 140 (per 1,000
capital
births)
• Reduce incidence/prevalence of communicable
diseases by 50%
How mobile can help
Education Health
Telenor Pakistan is helping to improve the gender A recent pilot project for birth registration through
equity in education for girls from bottom of the mobile phones, initiated by UNICEF and in
pyramid (BOP) families in rural areas, through collaboration with local and provincial authorities,
the Sindh Education Reform Programme (SERP). looks to make the process of registering a new birth
Launched in June 2014 in 23 remote districts of the easier. New births are logged by health workers on
Sindh province, the programme provides stipends their phones, and the data is delivered to a central
to 425,000 female students using the Easypaisa team who verifies the data, approves the case, and
network.16 uploads to the official database. In 2015, 95% of
new-born children were registered within the first six
In November 2015 Zong announced that it would months of their birth, compared to around 5% in 2014.17
provide 100,000 3G dongles to students for free
across Pakistan as part of the Prime Minister’s laptop Health-related apps are a nascent market in Pakistan,
scheme, phase two. The students are provided but one example of a successful initiative is Find My
with wireless internet access to global educational Doctor, which helps people find local doctors and book
resources available on the Higher Education appointments in and around Karachi.
Commission’s digital library, for which Zong is
also helping with the design, implementation and Mobile operators have also been instrumental in
execution. helping to raise funds and awareness for several health
campaigns. For instance, Mobilink partners annually
with the Pink Ribbon Pakistan cancer awareness
campaign and the Shaukat Khanum Memorial Hospital.
SMS messages are sent to its customer base to
generate funds to treat cancer patients and to raise
awareness.
16 Best Mobile Service for Women in Emerging Markets, GSMA, February 2016
17 Boosting birth registration in Pakistan with mobile phones , UNICEF, May 2016
Pakistan as a digital society 25COUNTRY OVERVIEW: PAKISTAN
Pillar Key objectives
2
• Become one of the largest 25 economies in the
world (from 41st in 2015), reaching Upper Middle
Income country status
Achieving
sustained, • Reduce poverty level by half, from 30%18 to 15%
indigenous and • Increase annual FDI from $600 million to over $15
inclusive growth billion
• Increase tax-to-GDP ratio from 9.8% to 18%
How mobile can help
Increased mobile connectivity has been shown to Studies by the GSMA and Deloitte have found
support market growth and increase national GDP. that in low to middle-income countries such as
Mobile penetration in Pakistan is currently at 47% Pakistan, a 10% increase in broadband penetration
and is predicted to grow to 52% by 2020. Greater accelerates economic growth by 1.38%,19 and that
connectivity positively affects the supply side of the a 10% increase in 3G penetration increases average
economy through the operations undertaken by annual GDP per capita growth by 0.15 percentage
mobile operators and players in the wider mobile points. 20 Achieving greater connectivity depends on
ecosystem, including providers of network services, investment by operators. It is therefore important that
providers of other support and commercial services, the government create a hospitable regulative and tax
and the network of formal and informal points of sale. environment for operators.
18 New poverty line makes a third of Pakistanis poor, Dawn, April 2016
19 Digital inclusion and mobile sector taxation in Pakistan, GSMA/Deloitte, February 2015
20 What is the impact of mobile telephony on economic growth? GSMA, November 2012
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